2019 3PL Study highlights ongoing changes in shipper-3PL dynamics

The intersection of supply chain technology, changing online consumer spending habits, data management, delivery preferences, and other factors are all serving as game changers in how 3PLs are continually striving to better serve shippers.

That is a key takeaway from the 2019 22nd Annual Third-Party Logistics Study, which was released today by Infosys Consulting, Penn State University, Penske Logistics, and Korn Ferry at the Council of Supply Chain Management Professionals (CSCMP) Edge conference in Nashville, Tennessee.

Data for the survey was based on feedback from 651 usable responses from shippers, or users of 3PL services, and non-users of 3PL services, as well as 3PL sector respondents.

Looking at shipper-3PL relationships, the study found that 91% of surveyed shippers said that their relationships with 3PLs “generally have been successful,” with 98% of 3PLs indicating their customer relationships have generally been successful. What’s more, 89% of shippers and 98% of 3PLs were in accord that 3PL usage had translated into improving customer services “to the ultimate customers.” And 73% of 3PL users and 91% of providers stated that 3PLs provide new and innovative ways to improve logistics effectiveness.

In an interview, Joe Carlier, senior vice president of global sales for Penske Logistics, said that when looking at the state of the 3PL sector in 2018, there appears to be a perfect storm effect in play.

“Since the beginning of the year, there has been a host of disruptions impacting the industry, starting with the ongoing driver shortage,” he said. “But this year with manufacturing output increasing, GDP growth, low unemployment, and capacity tightening up the way it is, everything is coming together. One of the drivers behind capacity was obviously the ELD mandate. There are a host of things all coming together…but I cannot recall a time in which so many disruptors have come together at the same time.”

Carlier also cited how the role of technology and the rapid deployment of new technologies, while helpful, can create “noise” as well, in trying to figure out what is needed, what adoption rates are going to be, and costs and benefits, which, he said, are serving as contributors to a unique time in the 3PL sector.    

That was made clear in the study, which explained that shippers are “increasingly” aware” that if they lack the technological capabilities to meet their goals, they need to partner with those that do. And it added that as the amount of available data increases, shippers and their 3PL partners need to be able to take information and make it relevant, something that is being reflected in technology investments to analyze shippers’ operations, with 93% of shippers stating that IT capabilities are a necessary part of 3PL expertise, and 55% of shippers indicating they are satisfied with 3PL IT capabilities.

Penske’s Carlier said that from a 3PL perspective, the further upstream a 3PL can be, the more strategic and effective its decisions can be, specifically when addressing technologies like a WMS or a TMS and really understanding the needs within a shipper.

“There are a lot of times where that relationship doesn’t work, and I think it is really because of both parties are not really spending the time to really understand the business requirements,” he said. “If you are deploying a TMS or a WMS but don’t understand the throughput, there is no artificial intelligence that is going to know exactly what the business needs are….so the further upstream 3PLs can get to understand those business requirements and the business rules that are affecting shippers, the more perfected that relationship can be. There are collaborative decisions through each one of those steps as you are looking at the supply chain in totality.”

With the changes, or shifts, in consumer buying habits, including what the study called a blend of in-person and online purchases, that, in turn, require quicker responses than in the past, the study’s takeaways showed some interesting contrasts.

One focused on agility, with 42% of shipper respondents having not made required changes to improve their agility over the last five years, and 51% saying they are open to new ideas to create more opportunities for 3PLs to introduce and implement innovations.

Other notable takeaways from the 2019 Third-Party Logistics Study include:

• how 72% of shippers and 71% of 3PLs agree that shippers/customers recognize the need for capable last-yard logistics services, with 53% of shippers saying they effectively manage last-yard logistics needs and only 34% agree that their customers effectively manage these needs;
• 4% of shippers said they are high-performing in omni-channel retailing, 38% are inconsistent, 36% have no capability; and 18% said they are competent, and 3% of 3PLs said they are high-performing, 24% said they are competent; 14% are efficient, 31% said they had no capability; and 28% said they were inconsistent;
• to meet omni-channel goals, 72% of shippers are investing in enterprise resource planning software, 56% are investing in warehouse management systems, 38% are investing in transportation management systems; and 38% are investing supply chain visibility and 24% are investing in WMS add-ons like labor management, analytics, and slotting organization;
• the most common supply chain disruptions shippers face are increased transportation costs (77%), transportation and logistics network disruptions (76%) and increases in supplier costs (67%); and
• looking at shipper-3PL data sharing, the study found that 61% of shippers and 54% of 3PLs said issues with data sharing between the two parties led to customer satisfaction issues, as well as late payments, not renewing a contract, and negative word of mouth